Highway Robbery!

April 29, 2006

The American people are being robbed at the gas pump.

With gas prices over $3/gallon, working families are spending hundreds of dollars every month just to get to work. These latest increases come while many of us are still trying to pay off our exorbitant heating bills from the winter.

And there is no relief in sight. Economists say prices will stay sky-high, at least through the summer. The politicians in Washington, D.C. are "talking tough" out of one side of their mouths while, from the other, claiming "there isn't much we can do about the problem."

The government and the oil companies are blaming these price increases on a "shortage of supply" and the fact that the price of oil on the "spot" market is over $70/barrel. But these are outright lies. Oil refineries get most of their supplies through either long-term contracts or from their own drilled oil. The price on the "spot market" has only a minor effect on the pump-price of gasoline. A recent study commissioned by the Foundation for Taxpayer and Consumer Rights, using official government data, showed that, out of the recent 60-cent increase in pump prices, at most 12 cents could be attributed to the higher price for crude oil in the spot market. As for a shortage of supply, the truth is that the big U.S. oil companies have long been working to cut U.S. refinery capacity. For example, a congressional investigation uncovered internal documents from several big oil companies outlining their successful strategy of forcing independent refineries out of business in order to close down capacity, create artificial shortages and jack up prices. The congressional report tells of an oil executive who "made clear that he would rather sell less gasoline and earn a higher margin on each gallon sold that sell more gasoline and earn a lower margin. Another employee of this firm raised concerns about oversupplying the market and thereby reducing higher market prices." ("Midwest Gasoline Price Investigation," of the Federal Trade Commission, March 2001).

Of course, the real problem is price-gouging by the big oil capitalists. In 1999, the average profit per gallon of gasoline was 22.8 cents; in 2004, profit/gallon rose to 40.8 cents and last year it reached 99 cents/gallon. (See testimony of Tyson Slocum of Public Citizen before Senate Committee, February 2006). Between 2001-2005, the top five oil companies in the U.S. grabbed nearly $280 billion in profits. (See Slocum). For the first quarter of this year, the companies are already announcing new records for profits - ExxonMobil: $8.4 billion; Chevron: $4 billion; ConocoPhillips: $3.3 billion.

The root problem is that a handful of giant companies dominate all facets of the oil and gas industry - exploration, production, refining, transportation, retail sales, etc. For example, just 10 companies (including ExxonMobil, ChevronTexaco, ConocoPhillips, BP/Amoco and Shell) control 83% of our country's refinery capacity. These giant capitalists use their monopoly position to extort ever-higher prices out of the American people.

The American people will continue to pay ransom for such necessities as heat and transportation until we challenge and restrict the power of the monopolies.

Oil and gas are natural resources which, by right, belong to the people of our country. The oil and gas industries have been created through public investment and the collective labor of the country. These resources must be put in service of the people.

As a first step, the availability and cost of such necessities as gas and heating oil cannot be left to the arbitrary ups and downs of the market or the price-gouging of the capitalist monopolies.

The government must take control over oil and gas pricing and distribution, regulating production in order to guarantee the availability of these commodities at the lowest possible price.

To fundamentally solve the problem, the oil and gas industries must taken out of the hands of the capitalists and returned to the public. These industries must be run on the basis of meeting the needs of the people and protecting the environment, not as a means of maximizing profits for the capitalists.